For salaried taxpayers, 2026 marks a transition year in income-tax compliance, making it important to understand the key income tax changes 2026 brings. ITRs for FY 2025–26/AY 2026–27 will continue to be governed by the Income-tax Act, 1961, while income from FY 2026–27 will fall under the Income-tax Act, 2025. This distinction is important for understanding documentation, deductions, salary-related declarations, and ITR accuracy. Here is what taxpayers should keep in mind before filing.
Key income-tax changes applicable for FY 2026–27
Here are some of the income tax changes 2026, along with important continuities that salaried taxpayers should be aware of for FY 2026–27:
- New tax framework begins from April 1, 2026: The Income-tax Act, 2025 and Income-tax Rules, 2026 come into effect for Tax Year 2026–27 from April 1, 2026.
- FY 2025–26 returns will still follow the earlier law: Returns filed for FY 2025–26 (AY 2026–27) will continue to be governed by the Income-tax Act, 1961 and Income-tax Rules, 1962.
- Taxpayers may deal with two frameworks in 2026: While ITR filing in 2026 will still follow the earlier legal framework, income earned from FY 2026–27 onwards will move to the new structure.
- Income-tax slabs remain unchanged under the new regime: Among the key income tax updates, tax rates under the new regime continue at nil up to ₹4 lakh, followed by 5%, 10%, 15%, 20%, 25%, and 30% slabs as income rises.
- Old regime slab rates also continue without changes: Under the old regime, tax rates remain nil up to ₹2.5 lakh, 5% up to ₹5 lakh, 20% up to ₹10 lakh, and 30% above ₹10 lakh.
- Standard deduction remains unchanged: Salaried individuals can continue to claim a standard deduction of ₹75,000 under the new regime and ₹50,000 under the old regime.
- Draft rules propose wider HRA exemption eligibility: The Draft Income-tax Rules, 2026 have proposed expanding the list of cities eligible for the 50% salary cap for HRA exemption under the old regime. The proposed list includes Mumbai, Delhi, Kolkata, Chennai, Hyderabad, Pune, Ahmedabad, and Bengaluru, while other locations would continue under the 40% cap.
Old vs new tax regime: What can salaried individuals choose?
The old regime may suit employees who claim deductions such as HRA, Section 80C investments, Section 80D health insurance premiums, or home-loan interest. In contrast, the new regime offers a higher basic exemption limit but removes several commonly used deductions linked to the old regime.
This makes salary structure an important factor while choosing between the two regimes.
For example, a taxpayer paying rent in Pune or Bengaluru and claiming HRA under the old regime may arrive at a different tax outcome from someone with limited deductions and a simpler salary package.
Employees with meal vouchers, company cars, concessional loans, education allowance, employer gifts, or other salary-linked benefits should also review how these are taxed under applicable perquisite rules. Under the Income-tax Rules, 2026, employer-provided meal benefits of up to ₹200 per meal may be treated as tax-free, subject to prescribed conditions. Earlier, the limit was ₹50 per meal.
The practical approach is to use an income tax calculator to calculate tax under both regimes before filing, instead of relying only on employer declarations made at the start of the year. Salary slips, rent proofs, investment receipts, AIS, Form 26AS, and applicable employer-issued tax documents can all affect the final tax position.
Important documents to collect before filing ITR
Before filing an ITR, salaried taxpayers should organise all relevant tax records in one place.
Start with the salary TDS certificate.
- Under the proposed revised form numbering system for FY 2026–27 onwards, Form 130 is expected to replace Form 16 for salary TDS reporting, while Form 168 is expected to replace Form 26AS.
- Taxpayers should also collect, where applicable, salary slips, bank interest certificates, rent agreement, rent receipts, landlord PAN, home-loan certificates, health insurance premium receipts, capital gains statements, dividend details, and proof of eligible deductions.
- AIS and TIS should also be reviewed carefully, as they capture information reported by banks, employers, brokers, depositories, and other reporting entities.
A return that does not match these records may result in queries, mismatches, or delayed processing.
Tax-saving actions to take before filing
Tax-saving before filing is not about making hurried investments after the year closes. It is about checking whether eligible deductions, exemptions, and salary components have been reported correctly.
As part of effective tax planning, taxpayers may start by comparing their tax outgo under the old and new regimes using actual salary data, rather than estimates. They should also check whether eligible deductions were declared to the employer and whether they appear in the salary TDS certificate.
Employees using the old regime should verify applicable items such as:
- HRA calculations
- Rent evidence
- Children’s education allowance
- Hostel expenditure allowance
- Eligible employer-provided benefits
The revised rules have increased children’s education allowance from ₹100 per child per month to ₹3,000 per child per month, and hostel expenditure allowance from ₹300 per child per month to ₹9,000 per child per month, each for up to two children. These exemptions are available under the old tax regime, subject to prescribed conditions.
The tax information (if any) in this article is based on prevailing laws at the time of publishing the article and is subject to change. Please consult a tax professional or refer to the latest regulations for up-to-date information.
Common mistakes salaried taxpayers must avoid
Salaried taxpayers should review the following common errors before filing their ITR to reduce the risk of mismatches, delays, or penalties:
- Confusing FY 2026–27 with AY 2026–27: AY 2026–27 relates to income earned during FY 2025–26, while the Income-tax Act, 2025 applies to income earned from FY 2026–27 onwards.
- Ignoring AIS and other tax records: Even if Form 16 or the proposed Form 130 appears correct, taxpayers should still review AIS and related records carefully. Interest income, dividends, securities transactions, rent payments, and other high-value transactions may appear separately.
- Choosing a tax regime without recalculating at year-end: Some employees select a tax regime at the start of the financial year but do not reassess it after final salary revisions, bonuses, investment declarations, or deduction changes.
- Missing taxable income or entering incorrect details: Common errors include omitting bank interest income, entering the wrong bank account details for refunds, or failing to report all eligible income sources.
- Failing to e-verify the return: An ITR is treated as incomplete if it is not e-verified within the prescribed timeline after filing.
- Delaying ITR filing beyond the due date: Late filing may attract a fee under Section 234F. The late fee can be up to ₹1,000 where total income does not exceed ₹5 lakh, and up to ₹5,000 where total income exceeds ₹5 lakh, subject to applicable conditions.
Step-by-step checklist before filing ITR
Taxpayers looking for guidance on how to file income tax returns may use the following checklist before submitting their ITR:
- Confirm whether you are filing for AY 2026–27 or reviewing tax implications for Tax Year 2026–27.
- Download salary TDS documents and reconcile them with salary slips.
- Review AIS, TIS, Form 26AS, and other applicable tax credit statements.
- Compare tax liability under the old and new tax regimes.
- Include interest income, capital gains, dividends, and any other taxable income.
- Verify HRA claims, deductions, exemptions, and employer-provided benefits.
- Confirm bank account details, PAN, Aadhaar, email address, and mobile number.
- File the return before the applicable due date and complete e-verification.
As per existing timelines, the due date for salaried taxpayers filing ITR-1 or ITR-2 generally continues to be July 31 of the relevant assessment year, while non-audit ITR-3 and ITR-4 cases are generally due by August 31, subject to CBDT notifications or extensions.
Conclusion
The income tax new changes in 2026 are expected to introduce revised terminology, updated forms, and broader disclosure requirements under the new framework. For salaried individuals, the focus should be on accurate reconciliation and reporting. Taxpayers should stay informed about relevant income tax updates, review documents carefully, compare tax regimes, verify AIS details, and file returns only after confirming that all information is accurate and complete.
FAQs
What are the key income-tax changes in FY 2026–27 for salaried individuals?
The key changes include the implementation of the Income-tax Act, 2025 from 1 April 2026, revised form references under the new framework, and updates to certain salary-linked exemptions and allowances. Taxpayers should also review applicable filing timelines, which may vary based on the type of return and official notifications.
Which tax regime may be suitable for salaried employees in 2026?
The choice depends on salary structure, rent payments, eligible deductions, investments, and employer-provided benefits. Salaried taxpayers should compare their tax liability under both the old and new regimes using actual income and deduction details before filing.
What documents are required to file ITR for FY 2026–27?
Salaried taxpayers should keep salary TDS documents, AIS, TIS, Form 26AS, Form 168 where applicable under the new framework, salary slips, bank interest certificates, rent proofs, investment receipts, capital gains statements, dividend details, and other relevant tax records.
Can salaried taxpayers switch between the old and new tax regimes every year?
Salaried taxpayers without business or professional income generally have flexibility to choose between the old and new tax regimes each year. However, the final choice should be checked against the applicable ITR rules for that year.
What are common mistakes to avoid while filing ITR?
Common mistakes include selecting the wrong tax regime, not reconciling AIS and Form 26AS details, missing bank interest, entering incorrect refund account details, not reporting capital gains or dividends, missing e-verification, and filing after the due date.
Is it mandatory to check AIS and Form 26AS before filing ITR?
It is strongly advisable to check AIS, Form 26AS, and Form 168 where applicable before filing. These records help reconcile income, TDS, tax credits, and reported transactions before submitting the return.
What happens if the ITR filing deadline is missed?
A belated return may still be filed, subject to applicable rules. However, late fees, interest, refund delays, and certain restrictions may apply depending on income level, return type, and filing date.
